Indholdsfortegnelse for 5/21/2020 i Finweek - English

writing this week’s note had me on tenterhooks. Not because of the usual uncertainty that comes with having to write 400 words that aren’t complete drivel, but because as I write this, I am filled with stomach-churning anxiety – and a side of anger – because, frankly, it’s not been a great couple of weeks since our last deadline. It started with the news that Associated Media Publishing had closed its doors, followed a few days later by the shock announcement that Caxton had decided to withdraw from magazine publishing. Most of us at finweek know people who have been directly affected by this – former colleagues, friends or even family. My mother is one of them. As of 4 May she is out of a job, as is the…

Mines are starting to reopen, with coal and open-cast mines allowed to operate at 100% and the rest at 50%. This is subject to the mines being able to implement safety measures to manage the spread of Covid-19. The problem for the industry is demand. Industrial metals are seeing a marked reduction in orders, and the demand for platinum group metals is even weaker due to vehicle sales collapsing. The only exception is gold, with investors buying it as a “fear hedge”, and its price being supported by reduced gold mining activity. That said, the weaker demand is in part being offset by reduced mining capacity, albeit there are aboveground stockpiles that can be sold. An important aspect to watch is China. The Chinese government is surely going to spend…

south Africa is a country of diversity – this is obviously true across many dimensions, but it is the skewed distribution of employment and wealth present in our country and its implications for the financial advice sector that is particularly important for this issue of Collective Insight. It is the nature of a capitalist economy to arrange itself to serve the needs of those who can pay for them. While this system can have many beneficial outcomes for society, it is not the only way to do it. As the current experience of the US medical industry shows in its response to the Covid-19 pandemic, it can result in very haphazard and discriminatory care to citizens in times of need. The SA financial services sector is currently arranged in a…

why is it that doctors have not yet earned the title “The Wolves of Groote Schuur”? Is the differentiating element the perception of care? Financial advice seems to be geared towards those that have money; and if you do not, then the profession has little vested interest in you. It seems blindingly obvious that we are missing a trick to reach people when it comes to financial advice. Rather than being practical, relevant, and accessible, we have created an industry that has an aloof yet in-your-face personality. Financial health is as relevant as medical health. It makes sense to recognise that if your citizens are not able to be financially independent, or productive enough to be self-sufficient, the burden on the social system will be more than can be managed.…

there are probably hundreds of thousands of consumers who are in a better position due to the financial advice that they have been given, be it that person who could retire, or the family who was financially OK after the loss of a breadwinner. However, times have changed and the consumer’s needs for financial advice have changed with it. While some professional financial advisers and planners have moved with the times, I think that it is fair to say that the industry has not adapted fast enough. To be fair, it is not a simple matter. Financial advice is not provided in a vacuum, it is provided in an ecosystem that consists of government, consumers, practitioners and product suppliers. Change is required across the system for advice to move forward.…

journeys are part of the human condition. We possess an almost paradoxical nature of resisting change while simultaneously longing for new experiences. All the preparation in the world, however, cannot take away the inherent uncertainty and risk that exist in these journeys and they often, when recounted, can provide readers with many enthralling tales and opportunities to learn. The tale of Odysseus’ journey back to Ithaca is one that has many parallels to the way that clients, advisers, and investment managers make investment decisions. Like travellers, investors bear a similar disposition and face similar challenges. They sacrifice consumption today in the hope of being rewarded over time for braving sometimes very turbulent market waters. This inherent uncertainty, however, is often enough to either keep us from jumping in – thus…

PHUMELELA GAMING AND LEISURE Saved by the Oppenheimers Phumelela Gaming and Leisure went into the Covid-19 lockdown in an already tough space, battling government on its 50% share of tax raised from horse racing, equal to about half of their profits. Lockdown, of course, halted the industry and bleak results were swiftly followed by the announcement that the company was going into business rescue. Here a recovery seemed unlikely, but Mary Oppenheimer Daughters has offered a post-commencement finance deal that could save the industry, and possibly the company. Of course, as is always the case with business rescue, or bankruptcy, the shareholders are the first to lose any rights as they get all the upside from a successful business but, equally, all the downside when the business fails. Even if…

support for South Africa’s lockdown, one of the world’s most stringent, has waned dramatically since it was imposed on 27 March, with business and the public urging government to ease restrictions quickly in the face of mounting evidence of the magnitude of its impact on the economy and people’s livelihoods. President Cyril Ramaphosa’s decision to take the step to protect South Africans from the spread of Covid-19, following the example of a growing number of countries, was initially met with goodwill. But this was undermined by the complex, often irrational web of regulations which accompanied the move to a less onerous level of lockdown on 1 May and the heavy-handed tactics adopted by police and the military to enforce them. Because SA’s lockdown was imposed so soon after the first…

i miss sport. I miss following my favourite teams, the bloggers who write about them, the news about new recruitments, arriving at a friend’s house on match day, the intensity of a big rivalry, the gloating after a win, and, yes, even the agony of perennial disappointments (and, to be honest, there are many if you’re a Protea, Stormers and Arsenal supporter!). Sport, I now realise more than before, has a way of bringing people together like no other social event can. On a big match day, I could have the same conversation with people of all walks of life, men and women, black and white, rich and poor, in multiple languages. I miss those interactions with my fellow South Africans. We, more than any other nation, know only too…

Famous in the gold sector for banging on about restructuring the industry – before making huge strides in achieving this following the merger of his Randgold Resources with Barrick – Mark Bristow, the South African CEO of Barrick Gold, is now calling for a restructuring of the mining sector, across all commodities. “The global industry has come closer together on a net asset value basis and it needs rearrangement, not just in gold,” he said in an interview with finweek following the publication of Barrick’s first quarter financial statements earlier this month. “We have created a real opportunity for genuine rearrangement and modernisation of the industry. It is a challenge owing to personalities [other CEOs in the sector], and relative commodity prices, but at the same time, it’s a huge…

In 2020 so far Sasol’s share price has lost about 70% of its value. After announcing that it was expecting its LakeCharles Chemicals Project in the US to make another loss for its financial year in 2020 – because of the explosion in the facility and the recent oil price rout – its share price plunged to an all-time low of 2 075c/share. Sasol produces oil from coal and the overruns of the chemicals project have been weighing on the company’s earnings annually. This year, oil prices have been under immense pressure from the weakening demand and storage shortages. For the first time in history, US crude oil futures turned negative in April. Sasol is now looking to pay down its debt by generating cash of $6bn through cost-cutting measures,…

as global and local markets continue to rally after the collapse of late March and early April, I am being flooded with questions from people who bought shares during the collapse and now want to know if they should be selling. The point I always make is that an investor or trader needs to have a plan for selling a position when they initially enter that position. Sure, the plan is to make a profit, but it needs more detail because what is a profit? Is it 1% or 100% or somewhere in-between? Equally important is that while we focus on the profit side of the equation, we also need to be very cognisant of the potential for a loss and, as such, our exit plan needs to have both…

▶ Contributing authors can determine whether any of the suggested angles under each topic would be of interest to address – or they can elect to introduce their own angle on the specific topic. There is no restriction. ▶ Contributors should avoid using their contributions as marketing pieces, opinion pieces or investment recommendation pieces. ▶ An advisory committee selects which contributed articles to include in Collective Insight. Selection is on merit and suitability only and is completely unrelated to any advertising that may appear in the publication. Please send any proposed contributions to Anne Cabot-Alletzhauser at cabota@aforbes.co.za…

if Covid-19 is teaching us anything, it is how little financial resilience there is among the general population of South Africa. Personal finances remain in a perpetually precarious state. The current financial system is not set up to help ordinary people. Sure, you can get easy access to credit at exorbitantly high interest rates, but it’s much harder to get proper advice on how to manage that debt, or how to get ahead in life more generally. This is true for traditional financial services globally, but even before Covid-19, South Africans already had to contend with more than most: a broken economy, rolling blackouts and a weakened currency. Then there’s the hidden burden of ‘family tax’ or ‘black tax’, which sees many people working hard and earning well, yet struggling…

there’s probably a good reason why financial advice has never been able to expand to a broader base – because the business of “wealth” management has been predicated on the notion that there was “wealth” in the first place. This means that compensation for this professional service would be based on either a fee as a percentage of assets under management or a commission embedded in the product itself – creating the illusion that they were getting the advice for free. In a post-Covid-19 world, financial advice will be the one thing that everyone in South Africa will require. But our starting point will be from a lack of wealth. How do we start again? Here is what this much-needed service will require: ▶ A new business model where advisers…

covid-19 came out of nowhere and the world ground to a halt. It stopped people from going to work, visiting friends and family, going on holiday, eating out and shopping for anything other than the essentials. It halted global trade and interrupted many businesses, and has led to what might become known as the fastest rise in the unemployment rate the world has ever seen. It changed the behaviour of probably around a billion people overnight. This pandemic almost stopped financial markets. From 20 February to 23 March, many global equity markets – including the UK, US, Europe, Australia, and many others – fell by over 30% as investors panicked and sold everything they could. As it stands, equity markets have recovered some of their losses. Some of us are…

on the first Saturday of May each year Berkshire Hathaway hosts its annual general meeting (AGM). This is no ordinary AGM as over 40 000 shareholders make the trek to Omaha, Nebraska where Berkshire has its head office and Warren Buffett his home. In past years, the AGM was a festive event with Berkshire companies selling their products followed by over eight hours of questions from the media and shareholders. But lockdown changed everything as the event became virtual and Charlie Munger was unable to travel, so it was just Warren Buffett and Greg Abel fielding questions. Abel is the chairman and CEO of Berkshire Hathaway Energy and vice chairman of non-insurance operations of Berkshire Hathaway. He is also the possible successor to Buffett at Berkshire. A video of the…

SPDR S&P Oil & Gas Exploration & Production tracks the equally-weighted S&P Oil & Gas Exploration & Production Select Industry Index and consists of 56 stocks. Its top-five holdings include EQT (6.3%), Range Resources (5.8%), Southwestern Energy (5.4%), Cabot Oil & Gas (5.2%) and CNX Resources (3.5%). It is traded on the New York Stock Exchange’s (NYSE’s) Arca Exchange. The ETF has $2.1bn under management. It’s currently trading at all-time lows since inception in 2006 and is 80% off from its all-time high (see graph 12). The ETF’s dividend yield is 3.13%. Energy Select Sector SPDR Fund holds 27 stocks and tracks the Energy Select Sector Index. The biggest holdings are Chevron (23.6%), Exxon Mobil (21.5%), Phillips 66 (5%), ConocoPhillips (4.9%) and EOG Resources (4.6%). It is also traded on…

drafting a will is a person’s final say on how their belongings, also called their estate, are to be divided. It holds implications for those that are financially dependent on the late testator and requires careful consideration while someone is alive. A person’s death can also have consequences if they own a business. During your lifetime you have absolute control of your estate and can therefore exercise any intention you wish to, says Donice Perkins, estates administrator at law firm Van Deventer & Van Deventer. When you pass on, this ability falls away. The importance of getting a will A will is an opportunity for testators to decide exactly what is to become of their estates (assets and liabilities) upon their death, explains Simon Dippenaar, managing partner at law firm…

never let a good crisis go to waste, SirWinston Churchill may, or may not, have said. Many politicians and economists are now taking that advice anyway, capitalising on the Covid-19 crisis, to advance their own agendas or justify their pet theories. In South Africa, for instance, the minister of cooperative governance and traditional affairs, Nkosazana Dlamini-Zuma, a strong anti-smoker, seems controversially to have browbeaten President Cyril Ramaphosa into reversing policy and imposing a ban on tobacco and cigarette sales during the lockdown. The minister of trade and industry, Ebrahim Patel, likewise banned e-commerce partly because of “the impact on other businesses”. So Patel, a communist, is clearly using the regulations to try to effect fairness among businesses. Neither of these policies have much to do with curbing Covid-19. At the…

with South Africa’s extended national lockdown having forced many businesses to embrace remote working at just a moment’s notice, the jury is still out as to how effective the rushed transitions to a purely digital existence have been. It’s simply too soon to tell. Most business leaders and teams are still immersed in Zoom meetings and Google Docs, fighting screen fatigue and bleary eyes as they acclimatise to a strange ‘new normal’. Cocooned in makeshift home offices, the daily stresses of long commutes and road rage have been replaced by the evils of online trolls and Zoombombing (when uninvited users enter your online meeting and share inappropriate or disturbing content). And while some companies have flourished in this purely virtual way of working, others have faltered. “SA businesses have experienced…

kumba Iron Ore, operator of Sishen, Africa’s largest open-cast mine, told the market in late April that it will focus on preserving cash amid the global coronavirus pandemic. The company scaled back its 2020 production and sales guidance to between 37Mt and 39Mt, and 38Mt and 40Mt of iron ore, respectively. It targets cost reductions of R325m and deferred capital outlays worth R1bn. This follows on a first quarter decline of 3% in sales as local demand for the steel ingredient halved. On the charts: Kumba broke out of its long-term bull channel driven by a mass market sell-off from fears of theCovid-19 pandemic in February. The downside halted at 20 525c/share, and after reporting a 62% jump in full-year earnings before interest, tax, depreciation and amortisation (ebitda) to R33.4bn,…

i have always been fascinated by the concept of human perception, especially when it comes to the selective decision-making process of what to remember and what not to. As a young man, I fell in love with the Alfa Romeo GT Junior sportscar. To me, there was no car more beautiful than that little red monster. It didn’t matter to me that technology, luxury and handling had improved over the years; I believed that if you were lucky enough to find one of these beauties, it would be the last car you own. About 15 years later, I finally managed to buy a 1976 model and I could hardly contain my excitement as I waited for the arrival of my new toy. Make no mistake, I enjoyed this car immensely,…

The following topics will be considered: ■ Can we make use of better metrics for assessing the value and impact of our investments? ■ Can we ever get to a universal agreement around appropriate metrics of value-add? ■ Do we understand where to turn to if we want investing to have an impact on a specific aspect of South African needs? What are investors really capturing when they invest in the JSE? ■ Different types of investments reflect different business models: • How do you assess which business models are likely to deliver what South Africa requires, for example: short-term vs long-term investing; paying for alpha performance (outperformance); private equity vs venture capital vs impact investing? What needs to change?…

the mindset of ‘making your money work for you and not just working for your money’ is difficult to embrace for most people in South Africa living from one paycheck to the next. According to the Allianz Global Wealth Report 2019, approximately 10% of SA’s population is classified as middle class and earns more than R10 225 per month – a figure considered barely feasible to provide for one’s needs in the present, let alone setting aside for the future. The other 90% of the population is in dire need of good financial advice and cannot access it because they cannot afford it or don’t have enough to invest. The financial advice they do receive isn’t holistic and is directed towards savings, life assurance or funeral cover needs and less…

a conomics, investing and financial advice have become highly mathematical pursuits. Indeed, numerical tools and models are paramount in these arenas. But we can always do better. The new and profound lens called narrative economics has the potential to elevate financial advisers’ analytical and predictive power. Spearheaded by 2013 Nobel Prize laureate Bob Shiller, this novel approach embraces the power of words. Shiller, professor of economics at Yale University, begins his argument for “a form of economics that takes narratives seriously” by demonstrating how economics and finance stand out from other faculties by their exclusion of narratives. “History, anthropology and sociology love narrative,” he says, “but the worst field for the understanding of narratives is finance.” The problem with this, Shiller continues, is that “it is important to learn about…

the distribution of financial advice favours clients that have already accumulated assets and are approaching the de-cumulation or retirement phase. Less than 6% of the South African population benefits from receiving this form of financial advice. The value of advice lies in both the technical elements and relationship elements. Technical value refers to factually correct and accurate plans as well as constructing and implementing various financial products in line with the plan. Relationship value refers to the confidence and trust that the client has in the adviser to assist them in achieving their objectives through ongoing support and coaching. I want to propose a financial advice model that better suits clients in the accumulation phase of their working life. The highest value of financial advice in South Africa lies in…

the general retail sector had fallen 49% since the beginning of the year by 11 May. Retailers of apparel such as Truworths and TFG had fallen more than 60%, while unlisted peer Edcon, has been forced to file for business rescue proceedings. The sale of clothing and merchandise by these retailers was not permitted during level 5 of the lockdown. The move to lockdown level 4 has permitted the sale of winter and childrens’ clothing to provide some (marginal) relief to these counters. Woolworths would have found the diversity of its food business to help support earnings over this difficult period. TFG sees roughly 30% of its sales coming from sports fashion, a division which is not permitted under the current level of lockdown. Mr Price’s sports division accounts for…

I’m Obviously Jill Hopkins @Jillhopkins All of our dogs think we quit our jobs to spend more time with them. All of our cats think we got fired for being the loser they always knew we were. Paul Rabenowitz @paulrabenowitz It’s well-known coronavirus only wakes up at 9am. Jennifer Wright @JenAshleyWright Well, millennials finally stopped going out for avocado toast. Can everybody afford a house now? Jess Dweck @TheDweck 2020 sounded like the most futuristic year and now we’re all like “I traded my neighbour a handkerchief for some carrots.” Kim Congdon @kimberlycongdon Not to brag, but what a time to be childless. Jonathan Jansen @JJ_Stellies When you impose book restrictions during a crisis it speaks volumes (sic) about the kind of leaders in charge. Lady Lawya @Parkerlawyer When my…